St. Jude Pays $3.7 Million to Resolve Fraud Allegations

June 7, 2010

June 7, 2010 – St. Jude Medical and two hospitals agreed to pay $3.7 million to resolve allegations it paid illegal kickbacks to two hospitals to secure heart-device business, the Justice Department (DOJ) said. The government alleges the kickbacks caused false claims to be submitted to federal health care programs in violation of the False Claims Act.

The DOJ said kickbacks included alleged rebates that were retroactive and paid based on a hospital's previous purchases of St. Jude heart-device equipment. The DOJ also said St. Jude paid rebates for purchases of heart-device equipment sold by its competitors to induce purchases of similar equipment from St. Jude in the future.

St. Jude Medical said in a statement the agreement fully resolves the investigation. The company said the allegations centered on small, isolated product rebates that the company paid more than five years ago. St. Jude said it entered into a settlement agreement in order to avoid the potential costs and risks associated with litigation, but does not admit liability or wrongdoing.

Under the terms of the settlement, the company will pay $3.7 million. Parma Community General Hospital, located in Parma, Ohio, is paying $40,000, and Norton Healthcare in Louisville, Ky., is paying $133,300. The government asserted that Parma and Norton were recipients of the improper rebates from St. Jude.

"Hospitals should base their purchasing decisions on what is in the best interests of their patients," said Tony West, assistant attorney general for the civil division of the DOJ. "We will act aggressively to ensure that choices about health care are not tainted by illegal kickbacks."

This action was initiated by the filing of an action under the False Claims Act by an internal whistleblower, Jerry Hudson. Under the qui tam, or whistleblower, provisions of the act, private citizens may bring lawsuits on behalf of the United States and share in any recovery. Hudson's share of the settlement is $640,050.

"St. Jude's marketing strategy interfered with the doctors' independent decision making,” said Warner Mendenhall, Hudson’s attorney from McLaughlin and McCaffrey LLP. “These types of incentives to gain market share shortchange patient care options for doctors and patients alike. These incentives have more to do with sales than patient well-being."

The Complaint can be found at http://www.docstoc.com/docs/39559633/US-ex-rel-Hudson-v-St-Jude-Medical.

For more information: www.sjm.com, www.justice.gov/opa/pr/2010/June/10-civ-658.html